CACI International [CACI] on Wednesday posted lower net income in its fourth quarter due to higher interest expense while sales slipped on fewer purchases related to the war in Afghanistan, lower run rates on professional services contracts, and delays in contract awards.

Net income fell nearly 4 percent to $36.5 million, $1.49 earnings per share (EPS), from $37.9 million ($1.56 EPS) a year ago, still topping consensus estimates by six cents. Operating income was actually up 2 percent on higher gross profit but a big increase in interest expense due to additional debt incurred related to the acquisition of Six3 Systems last November drove earnings lower. Six3 added $5.8 million to the bottom line, which the company is pleased with, Tom Mutryn, CACI’s chief financial officer, said on Wednesday’s earnings call.

CACI President and CEO Ken Asbury
CACI President and CEO Ken Asbury

Sales dipped just under a percent to $905.7 million from $912.9 million a year ago, with a significant contribution from the Six3 deal, which contributed $114.7 million in revenue. Absent the Six3 revenue, organic sales tumbled more than 13 percent.

Sales in the areas of signals intelligence, precision geo-location and non-traditional cyber solutions were in line with expectations, Mutryn said. Ken Asbury, CACI’s president and CEO, said on the call that the cyber market is still emerging but is beginning to increase in terms of the federal budget, a trend he sees continuing for the “foreseeable future.”

CACI officials said on Wednesday’s earnings call that they expect the company to return to organic growth by the fourth quarter of its fiscal year 2015. The prospect of higher organic revenue hinges on winning new business and the officials said that leading indicators for additional work are strong.

CACI has bid for $9.8 billion in pending awards, 80 percent of which is new business, Mutryn said. In the next six months CACI expects to bid on $11.6 billion worth of business, 80 percent of which is new for CACI, he added.

Ken Asbury, CACI’s president and CEO, said on the call that he expects the federal government to operate under a continuing resolution for at least the first month of its new fiscal year that begins Oct. 1, which means market conditions that have existed for the past year, including contract bridging and delayed awards, will continue.

Despite the challenging budget environment, Asbury expects to see the usual increase in government awards as its fiscal year draws to a close. He also said that there has been an increase in Requests for Information and Requests for Proposals, “and if the increase in volume corresponds to an increase in timely contract awards, that will serve our industry and CACI very well.”

The company maintained its guidance for FY ’15, with sales expected to be between $3.3 billion and $3.6 billion with net income between $125 million ($5.10 EPS) and $135 million ($5.51 EPS). Organic sales are expected to be down between 9 and 10 percent during the year.

Sales in FY ’14 were down 3 percent to $3.6 billion while net income fell 11 percent to $135.3 million ($5.38 EPS). Free cash flow for the year was $183 million.

Total backlog at the end of the fiscal year stood at $7.1 billion, $1.6 billion of which was funded. Mutryn said that the company has about $400 million in unused credit capacity with the ability to raise further capital, giving CACI the flexibility to pursue additional acquisitions.

Asbury said that the mergers and acquisitions market has picked up but that CACI hasn’t found any deals of late to its liking. He said the company is interested in addition high-end solutions capabilities, particularly around C4ISR, intelligence, cyber and healthcare.